Global Companies' Successive 'De-Russia' Moves... Korean Companies Also 'Closely Monitoring the Situation' (Comprehensive)

Global Companies Including Apple Announce Successive Withdrawals from Russian Market
Meanwhile, Korean Companies 'Closely Monitoring' the Situation
Many Russian Factories and High Sales Proportion Pose Significant Practical Challenges

[Image source=Yonhap News]

[Asia Economy Reporter Kim Jin-ho] In relation to Russia's full-scale invasion of Ukraine, while major global companies are successively declaring 'de-Russification,' Korean companies appear hesitant about direct or indirect involvement. This is analyzed to be because they cannot realistically ignore the proportion of sales in Russia, making it difficult to hastily join Western sanctions.

According to the industry on the 2nd, Apple completely stopped selling products in Russia starting from the 1st (local time). Apple's decision is a response to Russia's invasion of Ukraine. Previously, Ukrainian President Volodymyr Zelensky had requested comprehensive support from global companies to pressure Russia.

Apple also restricted its payment service Apple Pay in Russia and prevented downloading of Russian media apps RT News and Sputnik News from the App Store.

Major IT and energy companies have also taken steps toward 'de-Russification.' Leading energy companies such as Shell, British Petroleum (BP), and Norway's Equinor recently declared their withdrawal from Russia. Meta, which operates Facebook, also banned accounts of Russian state media from advertising or conducting commercial activities on its platform.

On the other hand, unlike major Western companies, Korean companies seem somewhat reluctant to participate in direct or indirect pressure on Russia. It is reported that major domestic companies such as Samsung Electronics and LG Electronics are not considering sales bans or humanitarian aid to Ukraine as measures to pressure Russia. For now, the priority appears to be closely monitoring the situation.

LG Electronics produces home appliances and TVs at its factory located in the Luzha area on the outskirts of Moscow. It also operates a sales corporation in Ukraine. Samsung Electronics manufactures TVs at its factory in the Kaluga region near Moscow.

The reason these companies cannot hastily join Western sanctions is largely due to the significant share of sales in Russia. Samsung Electronics and LG Electronics hold the number one position in major home appliance sectors such as washing machines and refrigerators in Russia. Samsung Electronics' smartphones have a 30% market share in the Russian market, ranking first.

In particular, unlike Apple, which does not have local factories in Russia, Samsung Electronics and LG Electronics have many local factories, making it realistically difficult to participate in sanctions. An industry official in the home appliance sector said, "Simply compared to companies like Apple, actively participating in Western sanctions could cause significant damage, so this issue is complex."

The situation is similar in the automobile industry, which accounts for more than 25% of Korea's exports to Russia. Especially Hyundai Motor has maintained loyalty during Russia's difficult times in the past and holds a high market share locally, making it difficult to join Western sanctions. Accordingly, Hyundai Motor emphasizes that the suspension of operations at its Saint Petersburg plant in Russia until the 5th is due to 'parts supply shortages' rather than participation in Western sanctions.

As Western sanctions on Russia intensify, global automakers such as Volkswagen, Volvo, and GM have successively stopped exports to Russia. However, since these companies have a negligible sales share in Russia, the industry consensus is that their risk is not as significant as that of Hyundai Motor and others.

Meanwhile, the government will soon begin negotiations to include South Korea in the exemption list for the United States' export control measure against Russia called the 'Foreign Direct Product Rule (FDPR).' The FDPR allows the U.S. to prohibit exports if foreign companies produce products outside the U.S. using software or designs controlled by the U.S.

The FDPR was included in the seven-sector export control measures against Russia announced by the U.S. government on the 24th of last month. The U.S. announced that 32 countries, including the 27 European Union (EU) member states, the United Kingdom, Australia, New Zealand, Canada, and Japan, which have independently imposed sanctions on Russia, are exempt from FDPR application, but South Korea was not included.

This content was produced with the assistance of AI translation services.